Helping households into the owner occupation – reality or a pipedream?
Our chairperson has been reflecting on a neglected aspect of the housing crisis – households who want to become owner-occupiers but aren’t able to because of primarily the cost of getting a foot on the ladder of owner-occupation.
National research from 2023/24 suggested that 60% of private renters and 25% of social housing tenants would like to become owner occupiers at some point in the future but the majority are struggling to achieve their goal. In addition, there are households going through a relationship breakdown, where both partners would like to remain in the home ownership sector but can’t afford to! There is also the increasing phenomenon of young adults staying in the parental home for longer because they can’t afford or find other accommodation. Office for National Statistics data shows that there was a 10% increase in the number of young adults (people 20-34 years of age) living with the parents between 2014 and 2024.
Nationally, 64% of dwellings are now owner-occupied compared with a peak of nearly 70% in 2005. But this picture is even more dramatic in Coventry. Approximately 57% of dwellings are currently owner-occupied, but in 1991 the figure was nearly 72%. Between 1931 and 1991, owner-occupation grew steadily every decade from 25% to over 70%. Coventry was regarded as a city with the highest proportion of working class owner-occupiers. Why was this the case? The basic reason was that the city’s prosperity enabled skilled and semi-skilled employees to become owner-occupiers much earlier in their life cycle. The economic collapse from the mid-1970s slowed down the rate of growth despite Thatcher’s policy of right-to-buy which boosted home ownership in many areas.
So what can be done to help households wishing to become home owners?
Nationally, the government will be publishing its housing strategy later this year. It is expected to include measures to ease access to borrowing such as higher limits for ratios of income to loan. Currently the standard figure is 1:4.5 but historically it has been higher – however this fuelled the finance crisis in the late 2000s!
There is also support for a new and expanded government help to buy programme. This involves helping first-time buyers by requiring a deposit of only 5% of the price of the property being purchased, with government providing an equity loan of say 20% (which is interest free for a number of years). Thus, it makes a mortgage relatively more affordable. Nevertheless, this type of scheme is expensive for the Treasury and would presumably lead to cuts elsewhere in public expenditure.
A further long-standing policy is to provide more rungs at the bottom of the owner-occupation ladder. The most well-known of these is shared ownership where households part-buy and part rent a property. Recent national rule changes allow households to purchase as little as 10% of the property. In addition, staircasing (ie buying more of the property) can be by as little as 1% chunks. However, shared ownership has had poor media coverage in London because most properties are leasehold flats and often have fire safety issues post-Grenfell. A more general issue that makes shared ownership unpopular with customers is that the occupier is responsible for all repairs even if they own only 10% of the value of the property and rent 90% from, say, a housing association.
Even so, there is a strong push for a bigger shared ownership programme which is funded through the national affordable homes scheme. The downside is that this would result in fewer new social rented homes as this is also financed by this scheme.
Lastly, on shared ownership, numbers are low even though the idea is frequently promoted. The latest data for Coventry suggests that there are less than 1,000 shared ownership properties – considerably less than 1% of the dwelling stock in the city.
So it is doom and gloom for potential new home buyers. What is needed is new thinking and the City Council and its partners could play a role eg
- Take stronger action against owners of long-term vacant properties making use of compulsory purchase and selling properties onto first-time buyers
- Enforcing the new licensing powers against rogue landlords in the Renters Rights Act with the potential of buying and then selling the property to first-time buyers.
Such action won’t change the world, but it can demonstrate a commitment to help this neglected segment of the population.